Finance Committee of the
Clean Power Alliance of Southern California
Regular Meeting
Wednesday, January 25, 2023
11:00 a.m.
Visit CPA’s YouTube Channel to view a Live Stream of the Meeting www.youtube.com/@CPApublicmeetings
*There may be a streaming delay of up to 60 seconds. This is a view-only live stream.
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting remotely at the following locations:
Camarillo City Hall
Mayor’s Office
601 Carmen Drive
Camarillo, CA 93010
Claremont City Hall
Citrus Room
207 Harvard Avenue
Claremont CA 91711
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Rolling Hills Estates City Hall
4045 Palos Verdes Drive North
Rolling Hills Estates
California, 90274
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Committee on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
Agenda Page 1
ACCESSIBILITY: Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from the November 23, 2022 Finance Committee Meeting
2. Receive and File November and December 2022 Risk Management Team Reports
3. Receive and File November and December 2022 CPA Investment Reports
4. Receive and File October and November 2022 Financial Dashboard
REGULAR AGENDA
5. Report from the Chief Financial Officer
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING ON FEBRUARY 22, 2023
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Public records are available for inspection online at www.cleanpoweralliance.org/agendas.
Agenda Page 2
MINUTES
REGULAR MEETING of the Finance Committee of the
Clean Power Alliance of Southern California
Wednesday, November 23, 2022, 11:00 a.m.
Pursuant to the Proclamation of the State of Emergency by Governor Newsom on March 4, 2020, AB 361, and enacting Resolutions, and as a response to mitigating the spread of COVID-19, the Finance Committee conducted this meeting remotely.
CALL TO ORDER & ROLL CALL
Committee Member Steve Zuckerman called the meeting to order at 11:00 a.m., and Gabriela Monzon, Board Clerk, conducted roll call.
Roll Call
Camarillo Susan Santangelo Committee Chair Absent
Carson Reata Kulcsar Committee Member Remote
Claremont Corey Calaycay Committee Member Remote
Rolling Hills Estates Steve Zuckerman Committee Member Remote Santa Monica Pam O’Connor Committee Member Absent
All votes are unanimous unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from the October 26, 2022 Finance Committee Meeting
2. Receive and File October 2022 Risk Management Team Report
3. Receive and File October 2022 CPA Investment Report
4. Receive and File Fiscal Year Q1 Financial Report and September 2022 Financial Dashboard
Motion: Committee Member Calaycay, Claremont
Second: Committee Member Kulcsar, Carson
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
5. Report from the Chief Financial Officer
Ted Bardacke, CEO, and David McNeil, Chief Financial Officer, provided a presentation on the 2022/23 Q1 financial results. Mr. Bardacke noted that the results were impacted by the record-setting extreme heat event in September. Mr. McNeil provided a high-level review of the financial results summary of July, August, and September of 2022. Mr.
McNeil indicated that the financial loss experienced by CPA during the heat wave is driven by the need to serve the excess energy load at above-average prices. Revenues were Agenda Page 3
Clean Power Alliance Finance Committee Page 2 of 2
November 23, 2022 Minutes
10% higher than budget for the month of September because of the cooler-than-normal temperatures in mid-September.
Responding to clarifying questions about the presentation, staff explained CPA is expecting about $10.5 million in CAPP funding in January 2023. CAPP funding will increase cash and decrease accounts receivable. CPA has been taking the impact of 2023 CAPP funding into account when calculating bad debt expense and the reserve for uncollectable accounts since June 2022. Additionally, prices continue to be elevated, but there have not been any significant adverse weather conditions to raise prices further.
Committee Member Kulcsar thanked staff for their consistent clear presentations and inquired about borrowing on the line of credit, and Mr. McNeil advised that it was paid in full and CPA has no current outstanding debt.
COMMITTEE MEMBER COMMENTS
There were no committee member comments.
ADJOURN
Committee Member Zuckerman adjourned the meeting at 11:28 p.m.
Agenda Page 4
Staff Report – Agenda Item 2
To:
From:
Approved by:
Subject:
Date:
Clean Power Alliance (CPA) Energy Committee
Geoff Ihle, Director, Energy Market Risk Management
Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Risk Management Team Reports
January 25, 2023
November 2022 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed October 2022 market performance
• Reviewed October 2022 generation performance
• Reviewed energy positions and approved 2022-2027 hedges • Reviewed positions for RPS and carbon free products, and SCE’s PCC1 Market Offer schedule
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Year-Ahead open position
• Reviewed December 2022 CRR Allocations and Auction
December 2022 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed December 2022 market performance
• Reviewed December 2022 generation performance
• Reviewed energy positions and approved 2022-2027 hedges • Reviewed positions for RPS and carbon free products, and SCE’s PCC1 Market Offer schedule
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Year-Ahead open position and procurement strategy
• Reviewed December 2022 CRR Allocations and Auction. Reviewed CY 2022 performance
Agenda Page 5
Policy Compliance
Policy Deviation Required Action
November 2022 None
December 2022 None
ATTACHMENT
None.
Agenda Page 6
Staff Report – Agenda Item 3
To:
From:
Approved by:
Subject:
Date:
Clean Power Alliance (CPA) Finance Committee
David McNeil, Chief Financial Officer
Ted Bardacke, Chief Executive Officer
CPA Investment Reports
January 25, 2023
RECOMMENDATION
Receive and File.
ATTACHMENT
1. November 2022 Investment Report
2. December 2022 Investment Report
Agenda Page 7
Fund Name: Local Agency Investment Fund
Beginning Balance 15,792
Interest Paid (1) -
Deposits -
Withdrawals -
Ending Balance 15,792
Interest Earned (2) 26
Average Monthly Effective Yield 2.007%
1.This Investment Report does not include CPA deposits held at banks.
2. Interest is paid quarterly effective 15 days following the end of the quarter.
3. Interest earned is based on daily compounding, account balances and monthly effective yield published by LAIF.
Clean Power Alliance
Investment Report (1)
November 2022
Agenda Page 8
Fund Name: Local Agency Investment Fund
Beginning Balance 15,792
Interest Paid (1) -
Deposits -
Withdrawals -
Ending Balance 15,792
Interest Earned (2) 29
Average Monthly Effective Yield 2.173%
1.This Investment Report does not include CPA deposits held at banks.
2. Interest is paid quarterly effective 15 days following the end of the quarter.
3. Interest earned is based on daily compounding, account balances and monthly effective yield published by LAIF.
Clean Power Alliance
Investment Report (1)
December 2022
Agenda Page 9
Staff Report – Agenda Item 4
To: Clean Power Alliance (CPA) Finance Committee
From: David McNeil, Chief Financial Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Financial Dashboard
Date: September 29, 2022
RECOMMENDATION
Receive and file October and November 2022 dashboards.
ATTACHMENT
1. October 2022 Financial Dashboard
2. November 2022 Financial Dashboard
Agenda Page 10
CUSTOMERS
Summary of Financial Results
Definitions:
Accounts: Active Accounts represent customer accounts of active customers served by CPA per Calpine Invoice.
Participation Rate %: Participation Rate r8epresent active accounts divided by eligible CPA accounts YTD Sales Volume: Year to date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales less allowance for doubtful accounts Cost of energy: Cost of energy includes direct costs incurred to serve CPA’s load Operating expenses: Operating expenditures include general, administrative, consulting, payroll and other costs required to fund operations Net operating income, also known as earnings before interest, depreciation and amortization (EBIDA), represents the difference between revenues and expenditures before depreciation expense, interest income and expense, and capital expenditures Cash and Cash Equivalents: Includes cash held as bank deposits.
Year to date (YTD): Represents the fiscal period beginning July 1, 2022 YTD
Oct
2022
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,001,998
Participation Rate
95.84%
YTD Sales Volume
4,341 GWh
Oct Sales Volume
900 GWh
Agr
2%
Com-Lg
20%
Com-Sm
27%
Res
51%
118
250
378
451
1114
0 200
400
600
800
1000
1200
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
in 000,000's
Operating Revenues
Actual Budget
21 20 5 9
$243
0 50
100
150
200
250
300
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
M…
Jun
Revenues Less Energy Cost
Actual Budget
0 20
40 60
80 100
120
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Cash & Cash Equivalents
Unrestricted Resctricted
in $000,000's Actual Budget Variance % Actual Budget Variance % Operating Revenues 73.7 85.1 -11.4 -13% 451.2 445.2 6.0 1% Cost of Energy 69.6 67.5 2.1 3% 442.5 391.5 51.0 13%
Revenues Less Energy Cost 4.1 17.6 -13.5 -77% 8.7 53.7 -45.0 -84% Operating Expenses 2.8 3.5 -0.6 -19% 10.9 14.9 -4.1 -27% Operating Income 1.3 14.1 -12.8 -91% -2.1 38.8 -40.9 -105% Oct Year-to-Date
In October 2022 CPA recorded operating income of $1.3 million which was $12.8 million less than the budgeted operating income of $14.1 million. For the year to date, CPA recorded an operating loss of $2.1 million, $40.9 million less than the budgeted operating income of $38.8 million.
October 2022 revenues were negatively impacted by the reversal of revenue from prior periods. Absent the reversal, October’s operating income would have been $15.1 million or 7% over the budgeted net operating income. Year-to-date revenue was $451.2 million or $6 million higher than budgeted revenue, reflecting warmer than normal temperatures which resulted in higher electricity use in CPA’s service area. The cost of energy was $442.5 million or 13% higher than budgeted. Higher than-budget energy costs resulted from warmer than normal temperatures, most notably an extreme heat event in the western United States that lasted from September 1st to September 8th, 2022, higher electricity use by CPA customers, higher prices in the California Independent System Operator (CAISO) administered markets and higher charges imposed by the CAISO to operate the grid.
Operating costs were lower than budgeted primarily due to lower than budgeted general administrative and other service costs and the non-utilization of contingencies.
As of October 31, 2022, CPA had $42.6 million in unrestricted cash and cash equivalents and had $79.853 million available on its bank line of credit.
CPA is in sound financial health and in compliance with its bank and other credit covenants.
Agenda Page 11
CUSTOMERS
Summary of Financial Results
Definitions:
Accounts: Active Accounts represent customer accounts of active customers served by CPA per Calpine Invoice.
Participation Rate %: Participation Rate r8epresent active accounts divided by eligible CPA accounts YTD Sales Volume: Year to date sales volume represents the amount of energy (in gigawatt hours) sold to retail customers Revenues: Retail energy sales less allowance for doubtful accounts Cost of energy: Cost of energy includes direct costs incurred to serve CPA’s load Operating expenses: Operating expenditures include general, administrative, consulting, payroll and other costs required to fund operations Net operating income, also known as earnings before interest, depreciation and amortization (EBIDA), represents the difference between revenues and expenditures before depreciation expense, interest income and expense, and capital expenditures Cash and Cash Equivalents: Includes cash held as bank deposits.
Year to date (YTD): Represents the fiscal period beginning July 1, 2022 YTD
Nov
2022
Financial Dashboard
Note: Numbers may not sum up due to rounding.
Active Accounts
1,003,200
Participation Rate
96.02%
YTD Sales Volume
5,143 GWh
Nov Sales Volume
801 GWh
in $000,000's Actual Budget Variance % Actual Budget Variance % Operating Revenues 75.1 78.4 -3.3 -4% 526.3 523.6 2.7 1% Cost of Energy 62.9 53.5 9.5 18% 505.4 445.0 60.4 14%
Revenues Less Energy Cost 12.1 24.9 -12.7 -51% 20.9 78.6 -57.7 -73% Operating Expenses 2.8 3.9 -1.1 -28% 13.7 18.9 -5.2 -27% Operating Income 9.3 21.0 -11.7 -56% 7.2 59.8 -52.6 -88% Nov Year-to-Date
Agr
2%
Com-Lg
21%
Com-Sm
31%
Res
47%
118
250
378
451
526
1114
0 200
400
600
800
1000
1200
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
in 000,000's
Operating Revenues
Actual Budget
21 20 5 9 21
$243
0 50
100
150
200
250
300
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
M…
Jun
Revenues Less Energy Cost
Actual Budget
0 20
40 60
80 100
120
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Cash & Cash Equivalents
Unrestricted Restricted
In November 2022 CPA recorded an operating income of $9.3 million which was $11.7 million less than the budgeted operating income of $21 million. For the year to date, CPA has recorded operating income of $7.2 million, $52.6 million less than the budgeted operating income of $59.8 million.
November costs were negatively impacted by $9.2 million of California Independent System Operator (CAISO) charges for the month of September 2022 which were recorded in November 2022. CPA received notice of these charges in December 2022. Absent the additional prior period charges, November’s operating income would have been $18.5 million or 12% less than the budgeted net income. Year-to-date revenue was $526.3 million or $2.7 million higher than budgeted revenue, reflecting warmer than normal temperatures and higher electricity use in CPA’s service area. The cost of energy was $505.4 million or 14% higher than budgeted resulting from warmer than normal temperatures, higher electricity use by CPA customers, and higher wholesale prices than budgeted. Operating costs were lower than budgeted primarily as a result of lower spending in general administrative and other service costs than budgeted and the non-utilization of contingencies.
As of November 30, 2022, CPA had $65.6 million in unrestricted cash and cash equivalents, and $79.853 million available on its bank line of credit.
CPA is in sound financial health and in compliance with its bank and other credit covenants.
Agenda Page 12
Staff Report – Agenda Item 5
To:
From:
Subject:
Date:
Clean Power Alliance (CPA) Finance Committee
David McNeil, Chief Financial Officer
Report from the Chief Financial Officer
January 25, 2023
The Chief Financial Officer will provide a presentation.
ATTACHMENT
1. Presentation
Agenda Page 13
Item 5 – CFO Report
January 25, 2023
Agenda Page 14
Summary
For the five months ending November 30, 2022, CPA recorded net income of $7.2 million, $52.6 million below budgeted net income of $59.8 million. Financial results were adversely impacted a major heat event in September 2022
CPA expects financial results from December 2022 to March 2022 to remain below budget due to significant increases in wholesale energy prices. Staff estimate a contribution to the net position in FY 2022/23 of ~$50 million compared to a budgeted contribution of ~$200 million.
To address market volatility, lower than budgeted financial results, and prepare for unforeseen events, at its January 18 meeting the Executive Committee recommended that the Board consider:
o Increasing CPA’s $80 million credit line with JPMorgan in March 2023 o Increasing rates in March 2023 through an interim “market adjustment” that would come into effect in April 2022 before the traditional rate setting cycle begins next spring SCE implemented significant rate increases on January 1, 2023 and even with a proposed rate increase in April, CPA would maintain rates that are highly competitive with SCE Agenda Page 15
Income Statement (Summary, GAAP & Adjusted)
July 2022 to November 2022
Rows A-F represent a summary of CPA’s income statement.
Row G adjusts revenues to reflect monthly revenues estimated using more current customer usage information and offsetting SCE billing corrections Row H reallocates CAISO charges invoiced following month end close to the month in which the charges apply. A total of $6.7 million of CAISO charges recorded in FY 2022/23 arose in FY 2021/22. CAISO recalculates charges during the normal course of business Row I represents net income following adjustments noted in row G and H. 3 Agenda Page 16
Income Statement (Summary, Adjusted)
July 2022 to November 2022
The impact of the extreme summer weather in the western United States generated a loss of $34.5 million in September offset by gains of $48.9 million in July, October, and November).
4 Agenda Page 17
Budget vs Summary, Adjusted
July 2022 to November 2022
Rows A through F represent adjusted Income Statement summary results minus Budgeted results for the applicable line item
Rows G and H represent the ratio of Adjusted Revenue and Cost of Energy with Budgeted results for the applicable line item
The impact of extreme weather events in Summer 2022 was the primary driver of budget deviation for the first five months of FY 2022/23
5 Agenda Page 18
Electricity Prices – November 2022 March 2023
Since December, electricity prices have far exceeded CPA budget forecast and historical winter prices Electricity price increases are driven by increases in the natural gas prices which determine the marginal cost of electricity.
Factors impacting California gas prices include repairs to pipelines serving Southern California from the Permian Basin, low gas storage levels in California, cold temperatures hitting the West earlier than usual, and coal plant retirements outside the state creating increased competition for natural gas. Short term renewable energy prices are also volatile.
Agenda Page 19
Electricity Prices – Hydro Conditions
California is experiencing above average precipitation, but it is still early in the hydro year and hydro levels began 2023 a t historically low levels
Above average precipitation, were it to continue, may limit electricity price increases. But it is too early to predict how 2023 hydro capacity will impact electricity prices later this year Agenda Page 20
Residential Rate Comparisons
40% renewables
lowest cost option
50% renewables
historic “parity rate”
100% renewable energy
no up-charge for low-income customers
Energy Product
July 2022
(Average
Monthly Bill)
Comparison to
SCE
Jan 2023
(Average
Monthly Bill)
Comparison to
SCE
SCE base rate
(~35% renewables) $172 $190
Lean Power $170 -1.0% $161 -16%
Clean Power $172 0.0% $162 -15%
100% Green $177 3.0% $168 -12%
Jan 2023 monthly bills are estimates; comparisons may vary slightly Agenda Page 21
Next Steps
Discuss increase in credit line and amendments to credit agreement with Executive and Finance Committees in February 2023 to provide additional liquidity and support a credit rating. Present recommendation for a credit limit increase to the Board in March Consider a rate adjustment at the March Board meeting to ensure CPA enters FY23/24 in strong fiscal health
Publish 2nd Quarter Financial Report in mid February and update full year forecast Prepare for traditional FY 2023/24 budget and rate setting cycle in the spring 9 Agenda Page 22
Questions and Comments
Agenda Page 23